Essential Marketing, Distribution, and Pricing Concepts Defined

Core Business and Marketing Definitions

Public Relations (PR)

Public relations embraces publicity but is broader; PR includes other ways of gaining favorable responses. Typical PR activities include:

• Donating money to charity
• Giving speeches
• Participating in community activities
• Sponsoring events
• Other public-facing activities

PR is the organizational function that manages the firm's communications to achieve a variety of objectives, including building and maintaining a positive image, handling or heading off unfavorable stories or events, and maintaining positive relationships with the media.

Intensive Distribution

When customers limit their search efforts, products must be easily available. Intensive distribution is a strategy where the firm maximizes the number and type of outlets where customers can buy the product. Intensively distributed consumer products include convenience goods like snacks and soft drinks. In emerging markets, intensive distribution is a critical strategic thrust for firms like Coca-Cola and P&G.

Exclusive Distribution

Exclusive distribution is an agreement between a supplier and a retailer granting the retailer exclusive rights within a specific geographical area to carry the supplier's product.

Distribution Channel Breadth

The number of members at a particular level in the channel system.

Value-Added Resellers (VARs)

Firms that build additional software modules onto other firms’ platforms and modify hardware for niche markets.

System Integrators

A system integrator is a person or company that specializes in bringing together component subsystems into a whole and ensuring that those subsystems function together. This practice is known as system integration.

Legal Concepts in Distribution and Pricing

The Robinson–Patman Act (1936)

Also known as the Anti-Price Discrimination Act, the Robinson–Patman Act of 1936 (Pub. L. No. 74-692, 49 Stat. 1526, codified at 15 U.S.C. § 13) is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.

Retail Price Maintenance (RPM) / Resale Price Maintenance

RPM is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices. Suppliers set retail prices under RPM. This agreement can involve:

• Selling at or above a price floor (minimum resale price maintenance).
• Selling at or below a price ceiling (maximum resale price maintenance).

Note: The legality of RPM varies significantly by country.

Tying Agreements

Tying agreements occur when strong suppliers force resellers to sell their entire product line. This practice is illegal in the U.S. if it is found to reduce competition.

Service Definition

A service is defined as: “Activities, benefits and satisfactions which are offered for sale or are provided in connection with the sale of goods.”

Service Equipment

Generally, services require tangible physical products, such as:

• Air travel: Airplane
• iTunes: iPod/iPhone
• Haircut: Scissors and mirror

Service equipment quality often significantly influences the overall service experience. For example, many passengers choose airlines with new planes (e.g., Singapore Airlines, JetBlue) versus those with older fleets.

Variability (Service Characteristic)

A key feature of services emphasizing a lack of consistency because of human involvement in service delivery.

Reliability

Reliability refers to the ability to perform the promised service accurately and dependably. In research contexts, it asks: "If I repeat data collection, will I get the same results?"

Responsiveness

The willingness to help customers and provide prompt service.

Pre-Purchase Customer Service

Activities designed to assist customers preparing for purchase, including helping them identify needs. This also encompasses promotional activities providing information about products and purchase locations.

Post-Purchase Customer Service

Support provided after the sale to help customers with various tasks related to the product, such as paying for, transporting, receiving, installing, using, returning and exchanging, repairing, servicing, and disposing of products.

Customer Relationship Management (CRM)

Customer Relationship Management (CRM) systems provide significant information about customers, including purchase histories, buying patterns, and firm interactions. CRM systems allow firms to identify customers by name, buying patterns, and history, supporting a customer-centric organizational form.

Communications Tipping Point

The level of communication frequency or intensity above which messages begin to generate customer resentment rather than positive engagement.

Perceived Value Analysis

Perceived value analysis involves securing data directly from customers, though sometimes experienced managers provide best-guess data that can be validated later by marketing research.

Perceived Value is a customer's opinion of a product's value to him or her. This perception may have little or nothing to do with the product's market price, as it depends primarily on the product's ability to satisfy the customer's specific needs or requirements.

Customer Value Map

An invaluable tool for tracking how customers perceive products. Customers (whether households or businesses) consistently look for products that give them the best value for their money.

Cost-Plus Pricing

Cost-plus pricing is a pricing methodology commonly used by many firms, reflecting an internal orientation (as discussed in Chapter 1). Despite its popularity, many experts argue cost-plus is an inefficient way to set prices.

The process involves simply identifying product costs and then adding a pre-determined profit margin (markup).

Marginal Costs

The cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.